Explaining the High Cost of US Health Care: No Skin in the Game

Costs are expensive because there is almost no skin in the game. Graft has taken over.

The Wall Street Journal has an interesting article on healthcare: Why Americans Spend So Much on Health Care—In 12 Charts.

The U.S. spends more per capita on health care than any other developed nation. It will soon spend close to 20% of its GDP on health—significantly more than the percentage spent by major Organization for Economic Cooperation and Development nations.

What is driving costs so high? As this series of charts shows, Americans aren’t buying more health care overall than other countries. But what they are buying is increasingly expensive. Among the reasons is the troubling fact that few people in health care, from consumers to doctors to hospitals to insurers, know the true cost of what they are buying and selling.

Contributions to employer-sponsored health coverage aren’t taxed, which makes it less expensive for companies to pay workers with health benefits than wages. Generous benefits lead to higher spending, according to many economists, because employees can consume as much health care as they want without having to pay significantly more out of their own pockets.

The prices of many medicines are hidden because pharmacy-benefit managers—the companies that administer drug benefits for employers and health insurers—negotiate confidential discounts and rebates with drugmakers.

Price Growth Since 2000

Hospitals are becoming more consolidated and are using their market clout to negotiate higher prices from insurers.

Tax Benefits

Contributions to employer-sponsored health coverage aren’t taxed, which makes it less expensive for companies to pay workers with health benefits than wages. Generous benefits lead to higher spending, according to many economists, because employees can consume as much health care as they want without having to pay significantly more out of their own pockets.

The tax benefit is the country’s biggest single income-tax break, costing billions to government revenue.

WSJ Misses the Big Picture

The charts are interesting but the WSJ misses the big picture: There is no incentive anywhere to reduce costs.

No Skin in the Game

Where the hell is "skin in the game"?

  • Those covered by Medicare have no skin in the game. And that is precisely why Medicare for All would be an abomination.
  • Those covered under company plans have little incentive to reduce costs. Once deductibles are met, there is "no skin in the game".
  • Lobbyists wrote Obamacare. The results speak for themselves.
  • Congress had a golden opportunity to allow drug imports but failed to act. Drug companies can charge what they want and insurers will pony up.
  • There is no right to refuse service. Hospitals take anyone and everyone whether or not they have insurance. As such, many don't have insurance. They have no skin in they game. Bankruptcy is a way out.
  • Massive amounts of money are wasted to keep terminal patients alive. Why? Because hospitals get paid by insurers. If hospitals didn't get paid, and had they had right of refusal, such nonsense would stop.
  • Obama himself: Obama dictated what had to be be in healthcare plans. They labeled them Gold, Silver, and Bronze. Lovely. Arguably they should have been called dumb, dumber, and dumbest. Why? Millennials and healthy people had to overpay to support everyone else. The millennials dropped out, just as free market principles would have dictated.

Let the Free Market Work

Please, let the free market work. Let insurers offer whatever plans they want. Let people buy whatever they want. And let those without insurance pay the price. I assure you, prices will plummet.

If you need a liver transplant and your insurance doesn't cover it. Sorry, you lose.

Costs for routine services will plunge because hospitals will not have to pay $200 for one aspirin to make up for the cost of an unpaid liver transplant.

Insurance plans ought to be able to force treatment overseas if someone is healthy enough to travel. A heart bypass operation in India is 10% of the cost here.

At a bare minimum, insurance companies ought to be able to offer such plans.

Personal Experiences - Stop and Smell the Lilacs

I seriously wonder if chemotherapy is more of a torture than a blessing. I watched my mom die in misery. The cost today is surely thousands of times higher. For what? To prolong someone's life for six months? At what cost? And who should pay?

When my mom stopped breathing, they asked my dad if he wanted them to try and revive her. He said no. Had he not been there, what would they have done? Why?

My wife, Joanne, died from ALS (Lou Gerhig's Disease). She was on extremely expensive drugs paid for under Medicare. Note that one does not have to be 65 to be under Medicare. Rather, Medicare picks up all costs on some terminal diseases.

Did those drugs do her any good? I doubt it. We also need to define "good". If they kept her alive for another three months (which I highly doubt), it was another three months of pain and suffering.

I sponsored a raffle for the benefit of the Les Turner ALS Foundation. And we put on a economic conference. John Hussman did a generous match of non-raffle proceeds. All told, we raised $500,000 for the Les Turner foundation.

This was an early post promoting the fund raiser: My Wife Joanne Has Passed Away; Stop and Smell the Lilacs

I am very proud of that, and also the amazing support from the Hussman Foundation.

That's skin in the game. Thanks again John!

Brass Tacks

We really need to get down to brass tacks.

Other countries seemingly have better healthcare because they control the cost of education, doctors fees, etc. They get cheaper drugs from the US than we have here.

Unless the US wants to control the cost of education, the cost of drugs, the cost of hospital care, and literally the cost of everything related, the US will not compare favorably to other countries.

In case you missed it, please consider "Free Stuff": Medicare for All Cost Pegged at $32.6 Trillion for 10 Years.

Medicare for All cannot possibly work here, even if it "seems" to work elsewhere. I suggest we try the free market, not more Obamaism.

Mike "Mish" Shedlock

Comments (103)
No. 1-39
Resjudicata
Resjudicata

I’ve been reading your blog daily since 2008. Never posted. Your economic analysis is generally spot on, in my judgment. I think it’s, perhaps, because you’ve made some money and appreciate the science of how the common person can make money. However, every time you venture outside of economics I tend to disagree with your posts vehemently. I think it’s because you lack the moral compass you have for economics. If I remember correctly, you married your new wife not long after your last wife passed. And that, sir, tells me everything I need to know about your social compass. Keep up the good work on economics. Do yourself and your readers a favor and skip your comments on social issues.

LawrenceBird
LawrenceBird

It is insulting for you to say people have no skin in the game. Can I ask that you send me a check each month to forward to my insurance company? How about all the seniors who pay hundreds of dollars each month for supplemental medicare coverage because, shock, medicare doesn't cover everything? And those 'employer sponsored health plans' - employees are paying for those via reduced income.

I suppose you say the same thing about those who have 'maxed out' their deductible on their auto policy after totaling their car. Just getting as much car care as they possibly can! Never mind the years of paying into the system.

Further - it is ghoulish that you suggest that an insurer should be able to ship any one off to a hospital in some distant country for surgery. Please, next time you require hospitalization (and we all do at some point), let us know which facility in India you have selected.

2banana
2banana

Another data point. Medical procedures NOT covered by the government or healthcare (cosmetic surgery, lazik, boob jobs, liposuction, etc.) have actually gone DOWN in price and with better quality. Why? The Free Market.

But hard to buy votes that way...

MntGoat
MntGoat

Great article Mish. Some other points. First of all, the lack of price transparency in health care is ridiculous. Try to call a few hospitals and clinics to get an estimate on a procedure before you go, and you will seriously get a run around and diversion tactics. There should be a published price list of procedures and you should be able to shop around for the best clinic and hospital.

I am self-employed, way under 65, and make above the poverty line. So I am one of the few people I know that has to take the full hit of the massive Obama Care premiums and giant deductibles. And very restrictive options available. So since I have a $8.5k deductible (after paying a huge premium!), I hustle and shop around and find out what things will cost before I get stuff done. Because I have to pay or it out of my pocket! People who get subsidies and/or have low or zero deductible plans could care less what something costs because they don't pay it!

The only people I have ever met that like Obama Care are either people who are below the poverty line that get it for free, work for the gov't, or liberals who work at company's that cover their insurance. So those people never see the real costs. I have not met one person to date who actually has to PAY for Obama Care who likes it.

Before Obama Care I had a high deductible catastrophic Blue Cross plan that was really cheap. In 13 years of having that plan, the premium barely rose over all those years. As soon as Obama Care kicked in, my premium doubled the very next day. And now has more then tripled. Because now I am thrown in the pool with the broke and sick people, and it falls on my shoulders to pay their health care costs.

There is no incentive to have a job and stay healthy with Obama Care. I exercise and eat healthy, but my reward is now massive premiums to pay for sick broke people who don't take care of their health. Why shouldn't a broke fat unemplopyed person not smoke 2 packs a day, drink like a fish and never exercise if healthy working people pick up all their medical costs??

GardenMaven
GardenMaven

Somehow everybody thinks medicine functions outside of economics and that "the system" is duty-bound to do everything medically possible for every patient, no matter how old and how close to death they are. In reality, a lot of what we do under the umbrella of "treatment" simply prolongs dying and misery. Great column!

Greggg
Greggg

There are still people crossing into Canada to buy pharmaceuticals for a hell of a lot less. My neighbor got arrested a the border on the way back from his "casino" trip with his fellow senior citizens along with nearly everybody on the bus. Obviously, they were going to the casino to escape the US Casino.

Magne777
Magne777

Try paying cash for a service, they have no clue on what to do, its so corrupt that if you try to pay cash, they all want to bill you something separately, this system is so defunct, so screwed from subsidies for tens of millions of CEO insurer pay that the only fix is to eliminate it the whole system and start over...never going to happen

Schaap60
Schaap60

Prices for services should also be posted by law. My auto mechanic in California is required to post his rates both hourly and for each service. Hospitals and doctors can do the same, at least online. It wouldn't surprise me at all if a patient could find providers that charge less than their co-pay, especially if they're on a 60/40 plan.

FelixMish
FelixMish

Mish, your comment about chemo raises one of the fundamental problems with health care.

We don't know if a "medicine" is going to work. We don't know the future. We wish we did. We want someone to be a witch doctor and fill us with some kind of certainty. Some security.

And we'll never get that.

So we try to feel secure in any screwball way we can.

That, to me, explains some of the bizarre thinking and behavior in the health care world and discussion.

BTW, I had chemo. It worked. My Dad also had chemo. It didn't work. My experience: Be in great shape going in. Know the statistics before pulling the trigger. Cut yourself slack - by design, chemo is not good for you.

BillSanDiego
BillSanDiego

The claim that our health care costs are high because people "can consume as much health care as they want without having to pay significantly more out of their own pockets" is nonsensical. If that were true health care in Europe, England and Canada, which do not have the deductibles and copays that the US requires, would be higher that in the US. Instead, the countries which charge the consumer zero, the ones in which the consumer actually does not have any "skin in the game," have far lower costs than we do.

speckie
speckie

Great analysis. Have often wondered why the US doesnt copy Australia's health care system. Australia has a mixed public and private system. The public tier called Medicare Australia provides free world class care to all australians and is funded by a levy of 2% on the taxable income of Australians. Most Australians still have private health cover for which they get a tax rebate. The upshot is australia provides free health care to everyone and spends about 6% of it's GDP to do so. Maybe Trump should send someone down under to check it out.

Jojo
Jojo

Look, forget these "Free Market" wet dreams some of you people dream about. There are too many stakeholders in every aspect of how our economy works, including healthcare to allow any sort of free market. Creating a free market would create huge dislocations for years while the new free market was established.

No, in healthcare, there are too many people are making a lot of money at the expense of the people they serve, which ironically includes themselves, to support the changes listed above. Some type of apocalyptic event or a revolt and revolution is the only way the current system is going to get changed.

pgp
pgp

Missing the point as usual because everyone focuses on one specific detail instead of looking at the big society picture which takes into account more science and history than just economic theory.

Health care price rises follow a general trend of the population (globally) toward obesity and diet related disease. A trend which corresponds exactly with reduced fat (an essential macro-nutrient) and increased starches (derived from corn and sugar) in our food chain. Consequently people are no healthier than they were 70 years ago, they just live longer due to medical intervention. Hence the "aging population" rhetoric.

70 years ago most people died before they could collect their pension. In fact the pension age was carefully matched to average life expectancy. Today everyone works half the number of years they live (or less) and those unworked years are the ones in which the most medical intervention is needed.

In addition the usual "supply and demand" economic rules can't possibly apply to the health industry because the demand for life in the face of death or disability is effectively infinite. Clearly life givers/sellers can charge as much as can be paid.

Ultimately if you want to reduce health costs you need to reduce demand by making people healthier... the only way to do that is to teach people how to eat properly, stop bending over for the sugar and corn industries, abolish feeder-lot farming and like practices along with false hard-core advertising for low quality food full of potentially toxic levels of sugars and starches.

We have to get people off the drugs we call food before we can talk about rehabilitation and health costs. Otherwise society gets what it voted for, a corporate driven world of legalized drug-food peddlers propped up by a pharmaceutical industry selling palliatives to the resultant addicts.

Jojo
Jojo

How a libertarian analyst inadvertently made a good case for Bernie Sanders' Medicare for All By Michael Hiltzik Jul 31, 2018

CautiousObserver
CautiousObserver

The expensive and deteriorating US healthcare system makes total sense when one realizes that most of our government managed programs are this way. Government aims to make housing more affordable by providing financing (housing becomes less affordable). Government aims to make higher education more affordable by providing financial aid (higher education becomes less affordable). Government aims to pay generous pensions to government workers (most government pensions face future insolvency). Government aims to control budget deficits (budget deficits breach new records). The track record is abysmal.

As I see it, the US Government may be the primary reason for the broken US healthcare system, starting in the 1960s. It also has tremendous say in how the system operates today. No other business in the US can legally, continually, charge higher prices to those who can pay more depending on insurance coverage and ability to pay. Why is that okay for medical businesses? Answer: The US government wants it that way and it chooses to selectively ignore established law. The whole thing stinks. Those who think a single payer system will solve the problem are kidding themselves (it will be run by the same crony capitalist lawyers that run the current system).

I agree with Mish that graft has taken over and I seriously doubt a medical free market will be reappearing anytime soon. It is more likely the whole thing implodes about the same time that the US starts looking like Venezuela. I do not want that, but that is the direction we are headed. “US fiscal policy [has been] on an unsustainable path for some time.” (Jerome Powell)

@pgp: I agree it would be helpful if the US obesity and diabetes epidemic were better managed. However, the unreasonable cost of health care in the US is not caused by that. One evening in an emergency room as a patient showed me first hand that price has little to do with health of the US population or medical services being provided.

JonSellers
JonSellers

I made a comment on the last healthcare post. And I got an opposing, but good response from Stuki. What I realized, along with Mish's post here, is nothing can change without the government taking some action. Even if that action is backing out of healthcare altogether. So my question becomes: what is going to cause elected representatives to forego the "campaign contributions" they receive from the medical community, health insurance community and their owners, and change the system? Isn't that the core issue?

Sechel
Sechel

I tend to agree. skin in the game is key. plastic surgery and lasik have the lowest inflation rates or rate of price increases and its probably due to the fact that insurance typically won't cover

JonSellers
JonSellers

Another comment and why this isn't a "skin in the game" issue:

From the article:

"As this series of charts shows, Americans aren’t buying more health care overall than other countries."

And:

"Generous benefits lead to higher spending, according to many economists, because employees can consume as much health care as they want without having to pay significantly more out of their own pockets."

So, as many of you know, Americans generally have far more "skin in the game" than folks in other OECD countries, but DO NOT consume more health care. Obviously, when tested against the real world, economic theory, as usual, is simply falsified.

But why wouldn't this be the case? Here's why: if I had an insurance policy that paid for the vast majority of my sports car's price, I'd have a showroom full of Porsches and Ferraris. Why? Because I love high end sports cars. I can't get enough of them. But health care? Am I going to drive into a brick wall at 90 mph so that I can collect on some of that sweet, sweet healthcare? Of course not. I hate going to the doctor even when I'm sick. Most mentally balanced people are the same. They aren't going to waste their time in a doctor's office if they don't have to.

So a secret that is impossible for economists to understand: Products are different and have different types of value and utility to people.

Secondly, the comments about lasik and plastic surgery not performing the same way as other healthcare spending. Is there something different about those products? Yes! They are fully optional from a standard of living perspective. I have another option to lasik of which I am fully aware of the price: glasses. Lasik is fully bounded, price wise, to the marginal increase in my standard of living by not having to wear glasses.

Compare that to your kid having cancer. I have no options. I will spend every penny of my and your money to save my kid from cancer. And I don't know the price of doing that (nor care). So even within "healthcare", products have different types of value and utility to people.

Blacklisted
Blacklisted

The primary problem is CONgress is aiding and abetting big "health care" companies, killing competition and price transparency - both are currently illegal. Existing law is not enforced because career politicians are paid off. Nothing will change until the career politician is made extinct by voting out every incumbent, every election.

If anyone looks around, the other problem/fraud is the food industrial complex, which has intentionally sold a food pyramid that is literally killing people. The recommended food and drugs (i.e. statins) are the opposite of what is needed. Step-4 of 5 is still valid.

Tony_CA
Tony_CA

Medicare for all is where we are heading. There is no semblance of a free market in our healthcare system. Nor will there be. If someone is on vacation in another region of the US and has a major medical event, he or she is not going to be shopping for the best deal.

JLS
JLS

If you're looking for an example of universal healthcare, Exhibit A is the British NHS. Formed after WWII, it was the pride and joy of the UK for years. Now it is terminal. What happened?

  1. The original system offered only basic care: wealthy people paid into it, but used private services which were higher quality. Now the NHS is often the only way to obtain the fanciest treatments, because nobody in their right mind would pay for it out of their own pocket.
  2. Since hospitals are obliged to treat whoever turns up, the world and its dog have turned up. It's cheaper to buy an air ticket from Nigeria to London and get free treatment than to get local treatment or get cheap treatment India.
  3. The bored and lonely use hospitals and clinics as a social welfare system. There is no evidence that the bulk of 'treatment' improves anyone's health. Often the contrary (cf. iatrogenic disease.)

The result is remarkably similar to the VA's Tricare: massively expensive, bureaucratically incompetent and corrupt, and a disaster for its customers who cannot get the basics while waiting for the extravagant.

JohnH
JohnH

As long as insurance companies exist, there is no free market to control costs.

QTPie
QTPie

The US has high costs but it has nothing to do with “skin in the game”. There are many many other advanced countries who’s skin in the game from their citizens when it comes to healthcare is waaay lower than US citizens’ skin in the game and yet, their overall costs are way lower while their overall health outcomes are either as good or better than the US.

All other advanced countries seem to have this mostly figured out except for us. Instead of trying to break our heads on this and reinvent the wheel on this issue we need to borrow the best ideas from the places healthcare works well (have good, accessible care provided at a lower cost than here — with as good of or better outcomes).

Dsgn
Dsgn

Mish is taking after CHS, commenting on the crime scene that is the MediCartel today. In the long run there is only one solution. It will most likely be part of the “end of empire” collapse, because there are no voices raised against it strong enough to implement a common sense glide path to lower, then zero, regulations.

The solution is Repeal. Repeal each and every law pertaining to medicine. The entire legal edifice supporting the cartel and its beneficiaries is anti-moral and anti-constitutional. The cartel beneficiaries will scream in terror that the sky is falling and the economy will collapse. Well, duh. Their Owners will collapse it anyway, stealing every last dollar from the tax cattle’s pockets on the way down.

It’s time to rip off the band-aid and let the pieces fall where they may while the system still some reserves to buffer it. While we are still in the Info Age and the lights are still on. While supply can be matched with demand with the existing currency rather than Reichsmarks or Bolivars. While soon to be useless administrators still have job opportunities asking “paper or plastic?”

Denninger projects 80% price cuts. Demand will probably fall 50% as patients realize insurance CANNOT pay for routine “oil changes”.

I know the tax cattle will bleat all the way to the collapse slaughterhouse while failing to act. Everybody wants everything. Nobody wants to pay anything. The “system works”, so why change it. “I got mine.” Orwell says the Proles never start revolutions anyway.

WSJ of course, missed the biggest picture. When some men claim legitimacy and rule quietly by violent domination (regs), armed robbery (irs), and mass theft (fed), their rule is against nature and nature’s laws, which include economics. The current Medi-Crime-Scene is not just part of the scenery of collapse, it maybe the trigger. When we accept the idea that collapse is inevitable, anything short of that is a bonus.

Repeal!

Dsgn
Dsgn

Here is an interesting quote from a link from a Q Post about “Ask the FBI Anon”:

Q: Is the FBI working on the mystery surrounding the deaths and disappearances of holistic health care professionals?

A: We are aware of them. However, we have not been given a green light to move forward. This has everything to do with Obama era policies, but it’s a good question and the feeling among some of us is that we would not be surprised if there are connections between these deaths and disappearances and a concerted effort by the reigning health elites. Understand that during the Obama era, we were instructed to avoid investigating anything that would harm his circle. Obama’s circle or Hillary’s circle to be exact.

I am no expert in the matter, but I understand close to 70 people in the holistic or alternative medical profession have ended up with strange and unexplained deaths or have vanished completely, under strange circumstances. It seems many of the deaths seem connected to either FDA or Big Pharma. I would personally be interested in data grazing this one.

End of quote.

Those are precisely the sort of people would have discovered if, how and why ALS is a nutritional issue and recommended lifestyle changes. Changes that threaten to prevent the "disease" in the first place and cost The Cartel Billion$.

AussiePete
AussiePete

If there was a steady stream of people walking off a cliff, the medical profession would build a $1billion hospital at the bottom of the cliff, instead of a $1,000 fence at the top. An ounce of prevention is worth a ton of cure. When HIV/AIDS started devastating lives in the 1980s, a hard-hitting TV campaign was conducted here in Australia showing ordinary folks being bowled over in a bowling alley by the Grim Reaper. It was criticized for being alarmist, but it resulted in a dramatic reduction in new cases, more than in any other country. We need public education campaigns run by the sharpest advertising minds in the industry to encourage lifestyle changes. For example, just correcting wide scale vitamin D deficiency would save an estimated 1 million lives world-wide a year, including reducing cancer rates by 50%

hmk
hmk

Another reason NHC might save money overall is that many people are deliberately staying out of the workforce or working less to qualify for free obamacare. It would encourage people into the workforce and also allow people to switch jobs to something more suitable for their skill level or even start a business. Also without the burden of heatlhcare premiums our companies may have a more competitive cost structure. I think financing for healtcare coming from a national sales tax would spread the costs onto the consumers. Finding the optimum solution via the free market is a good idea but it hasn't happened to date and I don't see it ever happening. To many special interests. Remember we have the best government money can buy. People are getting sick of this crap and when a democrat promises NHC they will get lots of votes as a result. Republicans will lose control as they have been a miserable failure in healthcare reform as have the democrates. Obamacare FUBB'd the healthcare system beyond belief.

Kenneth-Royer
Kenneth-Royer

The reason that the underlining cost of health care is so expensive these major companies are in criminal violation of the Clayton, Robinson-Patman, and the granddaddy Sherman Anti Trust Acts. These laws have been on the books close to and over 100 years! The President could instruct his Department of Justice to begin prosecuting violators for civil fines and possible PRISON SENTENCES. These companies routinely collude in order to price fix and now have moved from local to regional monopolies.

Having skin in the game is important but what is far more important is to put a stop to these OBVIOUS criminal actions. Also one needs to have transparency in prices such as highlighted and illustrated by The Surgery Center of Oklahoma where prices are posted [no log in required]. These prices are an all in situation. If their diagnosis is not completely correct and additional work is required "They eat the extra cost!" Get an infection "They eat the extra cost!"

Why hasn't this been enforced by so many Presidents from both parties? Simple the Medical Industrial Complex lays out far greater campaign dollars than their cousin the Military Industrial Complex. Simple as that.

Mish has it correct when it comes to re-importation of drugs which is OUTRAGEOUS that Congress plus whatever President signed into law making a normal business transaction illegal. My wife before having laser eye surgery imported glaucoma medication from Canada at a large discount. My wife and since I was party to this is a commission of a FELONY!

Legislation passed allowing re-importation of drugs. Enforce vigorously all three Acts previously mentioned the underling cost of health care will plummet depending on complexity of illness from 65% to high as 90%! And that is not a typo!

Skin in the game let's start by seeing HANDCUFFS for many of these CEO's!

Escierto
Escierto

Is it just a coincidence that the only group of people in the US with socialized medicine are the elderly? They have wealth and incomes way above average and they vote in their own self interest. They use a disproportionate share of the health care pie but they don't pay their share. Yet any suggestion that the rest of the population get the same deal is met with derision and dismay. I am looking forward to the day that the younger people decide to exercise their voting rights to eliminate Medicare and Social Security completely. Then we will see how the pigs squeal!

Casual_Observer
Casual_Observer

The only way to control the personal cost is to benefit from the rising costs. The US puts investors and owner class first and everyone else last. There will be a revolt at some point.

jgalt
jgalt

The reason why healthcare is so expensive is BECAUSE of insurance, both public and private. Doctors and hospitals work on a reimbursement system, which is negotiated with insurers. The amount they get reimbursed ranges from 0%-40%. Private insurers pay the higher rates, while public like medicaid and medicare pay next to nothing. The true cost of care is about the average of what insurance pays, otherwise there would be no hospitals or doctors. Nobody can run a business discounting the true cost of care by 60-100%. Where people get shafted is when they are uninsured. Many hospitals and doctors are forbidden by contract from billing the uninsured less than what is billed to insurance. Bankruptcy is what usually results. Some have been moving to a cash only based system which is encouraging.

nic9075
nic9075

Millennials and healthy people had to overpay to support everyone else. The millennials dropped out, just as free market principles would have dictated.

Uh no, millenials get to stay on parents policy until age 26 then they pay a rate of usually less than $200 a month or the cheapest rate available. $200 a month is the price for standard CABLE TV service or what is spent on a week of eating out..

See what the rates are for a healthy person over the age of 45 (who will never find a job if laid off due to the rampant and blatant AGE DISCRIMINATION in most white collar jobs)

I mean get the fact straight before spouting off such nonsense.. Remember that millenials usually rely on mommy & daddy to make their rent and student loan payments as well

AlexSpencer
AlexSpencer

In my general transactions I've noticed that when it is clear that I am the one paying then the seller instantly becomes more attentive to my needs. In health care generally this is not the case so the services are directed to the insurer's needs instead. The ability to charge you for services you don't request also plays in. As a result most often you don't get what you are paying for (ie. a cure).

everything1
everything1

Drug imports are spilling into the country, 70% comes from India, markup is about 3000% though. Oh their are ways, once you learn them. Oh, lol, they refuse service alright, with a myriad of tricks. Doctors are coached, and outnumbered by administrators 10 to 1. Keep in mind America is the sickest country on the planet, #1 for heart disease, cancer, auto-immune, and the third leading cause of death is iatrogenic or death by doctor. What you need to understand Mish is that we sell the disease and the elixir. We see commercials on TV, insurers and health care groups taking turns bad mouthing each other, see it's the insurance companies who are actually turning the screws now, they decide what the doctors do, how they do it, and who gets what. It's a hard pill to swallow when your health care system is ranked about 38th among developed nations, and dead last among the commonwealth. I just hired an independent IFM, cost me thousands but could save me hundreds of thousands in the future because her game is root cause diagnosis majoring in nutrition and lifestyle science. It's not about reducing costs, it's about healing, they are not healers, the U.S. health care system thrives on sickness, their is no money in wellness, only sickness pays. Go to a socialized health care country oh they are all better than ours, ask about insurance, deductible or co-pays, they don't know what those things are! A friend in a forum I frequent reached out last week with some kind of health issue, refused to see a doctor, don't have the $, I said you call me on Sunday to go over symptoms, to busy!, he died that day!!! He was a good man!!!!!

gliderdude
gliderdude

Partially agree with article. Having some skin in the game is important. Unlimited medical care for free would be nuts as there needs to be cost benefit analysis to control expenses. But realize that it is over the head of the majority of consumers to intelligently shop for medical deals even if they would have the time to do so. The free market does not work if the consumer can not choose the best product. That is why the free market has failed in this area and instead has selected insurance companies that best filter out sick people and insure only the most healthy. That end point for healthcare is perverse and insane. If the USA was a civilized democracy, it would provide a limited base level of Medicare for All. And the wealthy would be able to purchase any extra insurance they desire. Instead we have a corporate oligarchy that somehow finds it more valuable to update our nukes and spend unlimited sums on an ill defined unwinnable wars on terror that promote an endless spiral of blowback. I doubt our forefathers had any concept of how badly their conception would turn out.

Our "leaders" plan is quite simple. Lower taxes on the rich, increase spending on the military, police, security, etc. Then after the deficits go out of control use that to cut benefits to lower-middle class, and as necessary print money and produce inflation which is in effect a flat tax that targets those that need to spend most of their income for survival.

pgp
pgp

Mish is on track with most things but free market idealism can't fix health insurance costs. Clearly the cost of insurance is set by the care givers, who are free to charge as much as they can. A free market brimming with competition might help if those care givers were selling bread or household cleaning products but they are not, they're selling "life".

The desire for life and health goes beyond simply supply and demand economics. This truth is exemplified by the fact that people, even outside the USA, mortgage their houses to get hold of the life giving drugs and services their governments and hospitals haven't approved or don't yet provide.

Given infinite demand what incentive is there for pharmaceuticals to spend more to increase supply when they can simply charge as much as they want for the little they do produce.

On the other hand a society suffering more and more obesity or cancer increases demand for life saving or pain mitigating medicine, compounding an already distorted level of demand.

By Mish's own admission the quality of medicine is clearly weighted towards producing services and drugs for diseases that sell. Meanwhile research into the treatment of rare diseases like ALS has to rely on second class funding from fund raisers.

Nevertheless by attacking the obesity issue, for example, reduction of physical demand could have a slight positive effect on pricing. That means getting people to eat the right foods, as opposed to the fast-food or tv-dinner, sugar rich swill the food corporations would prefer to peddle.

Clearly however, the high emotional demand for dopamine inducing foods, like a desire to live without pain or live longer, can't be regulated by a freedom of commerce. The only way to stop people eating rubbish and getting sick is to regulate the food companies. Similarly regulating the medical industry by controlling prices and production or perhaps by making the Hippocratic oath legally binding, would help to keep prices in line with physical costs.

The bottom line is that governments, whose sole function is to police society NOT control it or offer support for profiteering, needs to protect people from the food producers, factory polluters and other industries making them sick while at the same time regulating to avoid price gouging and exploitation.

Societies problems are inevitably stem from deeper complications. And can't just be fixed with a band-aid. Superficial analyses like the one Mish offers in this article belong in the same bin as the other ineffectual government policy being proposed today.

Deter_Naturalist
Deter_Naturalist

Medical Services is a vast asset-stripping regime whereby Hospital Systems collude with Medical Insurers to price-fix and run guaranteed-income cartels.

Just as Universities simply use naive 18-23 year-old college students as a conduit to arrogate vast sums of money from lenders (who use the system to loot borrowers' first 15 years of adulthood), hospitals and insurers are increasingly using patients to simply loot employers, savers (patients whose assets can be seized to satisfy vast bills) and now even Social Security (recent reports show how much of an old person's SS now goes to Medicare "copays," and such.)

None of this is market-driven. None of it is voluntary. None of it is disciplined by competition. Instead we are treated to BS euphemisms like "evidence-based medicine" and endless commercials touting $40,000/yr biologics for eczema, the entire goal of which is to sift the population for patients (or hypochondriacs) with deep pockets or employer-paid (deep pocket) insurance (and the insurer gets paid cost-plus, so hitting their "forecasts" requires MORE BODIES, that's all.)

Step #1 should be to eliminate the legal cartels. Repeal all laws that interfere with free-market insurance contracts and rigidly enforce anti-trust and price-fixing laws against Aetna, BC/BS and all the others.

Deter_Naturalist
Deter_Naturalist

Your dissatisfaction with market-based solutions is understandable, but I suspect you misunderstand how markets work.

You are correct, desire for life-prolongation is infinite, but there has to be some way to allocate resources. Mises irrefutably showed in 1922 (almost a century ago) that it is quite literally impossible to efficiently allocate resources in the absence of market-established prices. You can posit any "plan" you wish, but I doubt much that you can provide one that doesn't end up squandering an ever-growing share of (finite) capital.

Where we have problems in medical services is equality. Our current obsession with equality of access binds us to systems that simply don't work (in the current case, medical services and the systems to pay for them are a Black Hole, promising economic catastrophe sooner than later.) No one wants to accept that a poor person will (and should) receive a lower level of services than does a rich person. Somehow, people magically think that medical services are "different" from food, potable water, transportation or any other good that must be produced by someone. People say, "healthcare is a right" but how can "A" have a right to something that must be produced by "B" without "B" being "A's" slave?

The current system is unsustainable. It is based on "cost-plus" cartels, it has no means of discriminating between high value, low value and actually-harmful medical services and has no means of reining in the ridiculous costs of treatments (Hep C as the poster-child.) But Job #1 is to utterly destroy the collusion between hospital systems and insurers. Do that, and then see what happens.